Tuesday, 12 April 2016

Risk is an inevitable factor in business operation activities, higher return is always accompanied by higher risks. Coping and managing risk is an integral part of any business if you want to make profit and create value to shareholders. However, in fact, there are a lot of businesses does not manage risk effectively and furthermore not fully understand about the risks that they are facing.

Risk can be defined broadly as any factors or events could drive business and production activities of the enterprise below forecasted. Specifically, the measures that are commonly used as capital risk, profit risk or cash flow risk, depending on the emphasis that are accounting balance sheet and statement of cash flows.

According to the Vietnam Ministry of Industry and Trade, in recent times, there are many corporate scams between Vietnam and foreign enterprises. In particular, the main behaviors are foreign companies purchase/sell goods or provide services for partners in Vietnam and the Vietnam partner fail to make payment.

Typically, a director has scammed 3 billion VND of foreign companies and he was arrested. Although his company does not have pepper but he still receives nearly 350,000 USD of the Egyptian company, then appropriated half. According to the investigation, a few years ago, Vinamex Co., Ltd signed contract with a Libya company in Egypt to sell 4 black pepper containers with price of 669,600 USD even though the Vinamex Company do not have condition to implement the contract and also do not have goods.

To obtain the money of partners, the Director of Vinamex forging multinational bills of lading, certificate of plant quarantine and then send to Lybia Company. The Lybia Company then transfer to Vinamex a deposit amount of 348,300 USD. After that, Vinamex’s director withdraws all money to pay for his company’s debt.

After months have been urging, the Vinamex Company buy a container of black pepper worth 174,150 USD and then send to Lybia Company. The remaining amount equivalent to 3 billion VND was appropriated by the Vinamex’s director. The Lybia Company has adopted Vietnam embassy in Egypt to submit the denunciation.

In fact, many business leaders often put heavy emphasis on the business activity, profit, and revenues instead of concentrating more on risk management. Improving risk management process will create a tight and effective control of the Board of Directors, on the other hand will help integrate the risk management process into every daily decision-making process.

Businesses do not improve the risk management process will be faced with a lot of different types of risks: financial losses serious, adverse effects on cash flows and the value of shares, as declining prestige with customers, employees and investors.

Businesses that do not improve the risk management process will have to face with a lot of different types of risks: serious financial losses, adversely affecting cash flows and the value of shares, decreasing prestige with customers, employees and investors.

In the period of global crisis had been predicted that almost bottomed out and started to show signs of recovery, although the recovery process can occur with different speed and characteristics depending on sector and location of the business, the fully preparation of business in all aspects including process and risk management strategy could helps business not falling into the passive and also have more possibilities to take advantage of growth opportunities after the recession.